The In-Depth Guide to Reading a Value Line Research Report

The Value Line Investment Survey is a unique source of financial information designed to help investors make informed investment decisions that fit their individual goals and levels of risk. It is: (1) a proven forecaster of relative stock performance over the next six to 12 months; (2) a source of interpretative analysis on approximately 1,700 individual stocks and approximately 100 industries; and (3) a source of historical information to help investors spot trends.

I: Getting Started
As a subscriber, you will receive three parts of The Investment Survey each week. Part 1 is the Summary & Index, Part 2 is Selection & Opinion and Part 3 is Ratings and Reports. Below we will describe each section and discuss some of the ways to use them.

Part 1 - Summary & Index

Start with the Summary & Index. The front cover contains a Table of Contents, three important market statistics, and a list of all the industries we follow in alphabetical order with their current industry rank shown next to the name of the industry. The page number is to the right. The market statistics are found in three boxes. The first box (a) has the median of estimated price/earnings ratios of all stocks with earnings covered in The Value Line Investment Survey (approximately 1,700). The second box (b) shows the median of estimated dividend yields (total dividends expected to be paid in the next 12 months divided by the recent price) of all dividend-paying stocks in The Survey. The third box (c) contains the estimated median price appreciation potential 3 to 5 years into the future for the approximately 1,700 stocks in The Survey, based on Value Line's hypothesized economic environment 3 to 5 years hence. By studying these statistics, a fairly good picture emerges of how the universe of Value Line stockswhich comprises approximately 95% of the market capitalization of all stocks traded in U.S. markets and is therefore quite representative of the stock market as a wholeis currently being evaluated.
Part 1

THE

ALUE LINE
Investment Survey

Summary & Index

File at the front of the Ratings & Reports binder. Last weeks Summary & Index should be removed.

June 5, 2009
TABLE OF SUMMARY & INDEX CONTENTS
Summary & Index Page Number

Industries, in alphabetical order .................................................................................................................................. 1 Stocks, in alphabetical order .................................................................................................................................. 2-23 Noteworthy Rank Changes .................................................................................................................................. 24-25

SCREENS
Industries, in order of Timeliness Rank .................. 24 Timely Stocks in Timely Industries .................... 25-26 Timely Stocks (1 & 2 for Performance) ............. 27-29 Conservative Stocks (1 & 2 for Safety) ............. 30-31 Highest Dividend Yielding Stocks ........................... 32 Stocks with Highest 3- to 5-year Price Potential .... 32 Biggest Free Flow Cash Generators ................... 33 Best Performing Stocks last 13 Weeks .................. 33 Worst Performing Stocks last 13 Weeks ................ 33 Widest Discounts from Book Value ........................ 34 Stocks with Lowest P/Es ........................................ Stocks with Highest P/Es ........................................ Stocks with Highest Annual Total Returns ............. Stocks with Highest 3- to 5-year Dividend Yield .... High Returns Earned on Total Capital .................... Bargain Basement Stocks ...................................... Untimely Stocks (5 for Performance) ...................... Highest Dividend Yielding Non-utility Stocks .......... Highest Growth Stocks ........................................... 35 35 36 36 37 37 38 38 39

a c

The Median of Estimated

The Median of Estimated

The Estimated Median Price of all 1700 stocks in the hypothesized economic environment 3 to 5 years hence

PRICE-EARNINGS RATIOS
of all stocks with earnings

DIVIDEND YIELDS (next 12 months) of all dividend paying stocks under review

APPRECIATION POTENTIAL

14.9
26 Weeks Market Low Market High Ago 3-9-09 7-13-07 10.1 10.3 19.7

2.5%
26 Weeks Market Low Market High 7-13-07 3-9-09 Ago 1.6% 4.0% 3.6%

85%
26 Weeks Market Low Market High 7-13-07 3-9-09 Ago 35% 185% 185%

ANALYSES OF INDUSTRIES IN ALPHABETICAL ORDER WITH PAGE NUMBER

Numeral in parenthesis after the industry is rank for probable performance (next 12 months).
PAGE PAGE PAGE PAGE

Advertising (53) ........................... 2367 Apparel (60) ................................. 2101 Auto & Truck (81) .......................... 101 Auto Parts (89) .............................. 778 Bank (94) ..................................... 2501 Bank (Canadian) (46) .................. 1986 Bank (Midwest) (82) ...................... 610 Beverage (6) ................................ 1958 Biotechnology (47) ........................ 660 Building Materials (83) .................. 845 Cable TV (12) ................................ 814 Canadian Energy (61) ................... 415 Chemical (Basic) (54) .................. 1232 Chemical (Diversified) (84) .......... 2413 Chemical (Specialty) (52) .............. 459 Coal (48) ........................................ 510 Computers/Peripherals (41) ........ 1101 Computer Software/Svcs (15) ..... 2571 Diversified Co. (64) ..................... 1754 Drug (13) ..................................... 1245 E-Commerce (2) .......................... 1815 Educational Services (1) ............. 2000 Electrical Equipment (50) ............ 1001

Electric Util. (Central) (39) ............. 687 Electronics (58) ........................... 1021

Investment Co. (24) ....................... 947 Manuf. Housing/RV (85) .............. 1973

Publishing (86) ............................ 2349 Recreation (78) ............................ 2301

Aerospace/Defense (16) ............... 543 Electric Utility (East) (40) .............. 148 *Investment Co.(Foreign) (42) ........ 359 *Railroad (65) .................................. 278 *Air Transport (44) .......................... 245 Electric Utility (West) (36) ........... 2232 Machinery (88) ............................ 1701 R.E.I.T. (72) ................................. 1172

Entertainment (55) ....................... 2319 *Maritime (76) ................................. 270 Reinsurance (29) ......................... 2027 Entertainment Tech (56) ............. 2010 Medical Services (8) ...................... 626 *Restaurant (4) ............................... 287 *Environmental (35) ........................ 346 Medical Supplies (26) .................... 169 Retail Automotive (7) ................... 2118 Financial Svcs. (Div.) (75) ........... 2527 Food Processing (28) .................. 1901 Food Wholesalers (9) .................. 1951 Foreign Electronics (69) .............. 1978 Funeral Services (90) .................. 1832 Furn/Home Furnishings (93) ......... 885 Grocery (33) ................................ 1941 Healthcare Information (21) .......... 652 Heavy Construction (14) ............... 978 Homebuilding (68) ......................... 864 Hotel/Gaming (62) ....................... 2333 Household Products (22) .............. 930 Human Resources (74) ............... 1291 *Industrial Services (17) ................. 319 *Information Services (11) .............. 374 Insurance (Life) (92) .................... 1198 Insurance (Prop/Cas.) (57) ............ 588 Internet (23) ................................. 2620 Metal Fabricating (95) ................... 570 Metals & Mining (Div.) (79) ......... 1222 Natural Gas Utility (18) .................. 446 Natural Gas (Div.) (59) .................. 427 Newspaper (99) ........................... 2358 Office Equip/Supplies (87) ........... 1128 Oil/Gas Distribution (19) ................ 521 Oilfield Svcs/Equip. (70) .............. 2388 Packaging & Container (32) .......... 914 Paper/Forest Products (73) ........... 902 Petroleum (Integrated) (43) ........... 397 Petroleum (Producing) (63) ......... 2377 Pharmacy Services (3) .................. 769 Power (91) ..................................... 960 Precious Metals (30) ................... 1212 Precision Instrument (80) .............. 114 Property Management (71) ........... 825 Public/Private Equity (98) ............ 2640

Retail Building Supply (20) ............ 878 Retail (Special Lines) (45) ........... 2162 Retail Store (5) ............................ 2130 Securities Brokerage (25) ........... 1799 Semiconductor (49) ..................... 1048 Semiconductor Equip (66) ........... 1085 Shoe (67) ..................................... 2150 Steel (General) (77) ...................... 580 Steel (Integrated) (97) ................. 1787 Telecom. Equipment (34) .............. 742 Telecom. Services (38) ................. 708 Thrift (51) ..................................... 1161 Tobacco (27) ............................... 1993 Toiletries/Cosmetics (37) ............... 803 *Trucking (96) ................................. 260 Water Utility (10) ......................... 1793 Wireless Networking (31) .............. 490

*Reviewed in this weeks issue.

In three parts: This is Part 1, the Summary & Index. Part 2 is Selection & Opinion. Part 3 is Ratings & Reports. Volume LXIV, No. 41. Published weekly by VALUE LINE PUBLISHING, INC. 220 East 42nd Street, New York, N.Y. 10017-5891
2009, Value Line Publishing, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for each subscribers own, non-commercial, internal use. No part of this publication may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.

See back cover for important disclosures.

Summary & Index

Beginning on page 2, the Summary & Index also includes an alphabetical listing of all stocks in the publication with references to their location in Part 3, Ratings & Reports. If you are looking for a particular stock, look inside the Summary & Index section, which is updated each week to provide the most current data on all companies included in The Value Line Investment Survey.

To locate a report on an individual company, look for the page number just to the left of the company name. Then turn to that page in Part 3, Ratings & Reports, where the page number is shown in the top right hand corner. In the far left column of the Summary & Index is a number that refers to recent Supplementary Reports, if any, which are included on the back pages of Ratings & Reports. If two stars (HH) appear in that column, it means that there is a Supplementary Report in the current Issue. There are many columns in the Summary & Index with more information on each of the approximately 1,700 stocks we cover. There is also a wealth of information in the stock screens toward the back of the Summary & Index, beginning on page 24. These screens are a good place to start for anyone looking for investment ideas or help in forming a strategy. The screens are also useful for investors who want a list of stocks relevant to specific strategies they may have in mind.
THE VALUE L INE
PA R T 2
Dear Subscribers, As part of our ongoing efforts to keep The Value Line Investment Survey the most valuable investment resource for our subscribers, the entire service, including all Ranks, is now being released on the Value Line Web Site at 8:00 A.M. Eastern Time on Mondays.You can access each weeks issue at www.valueline.com by entering your user name and password. We look forward to continuing to provide you with accurate and timely investment research. Thank you. Faithfully,

Part 2 - Selection & Opinion

Selection & Opinion (S&O) contains Value Lines latest economic and stock market commentary and investment ideas, along with one or more pages of research on interesting stocks or industries, and a variety of pertinent economic and stock market statistics. It also includes three model stock portfolios (Stocks with Above-Average Year-Ahead Price Potential, Stocks for Income and Potential Price Appreciation, and Stocks with Long-Term Price Growth Potential). If you spend time with Selection & Opinion each week, you should be able to get some valuable investment ideas and a good understanding of Value Line's outlook for the economy.

PAGES 3793-3800
File in page order in the Selection & Opinion binder.

Investment Survey

Selection & Opinion

DECEMBER 12, 2008

ECONOMIC AND STOCK MARKET COMMENTARY

The Value Line View

In This Issue
The Value Line View Industry Analysis: Educational Services Selected Yields Federal Reserve Data Tracking the Economy Major Insider Transactions Market Monitor Value Line Asset Allocation Model Industry Price Performance Changes in Financial Strength Ratings Stock Market Averages
The Selection & Opinion Index appears on page 3817 (November 28, 2008).

The economic picture continues to darken, with data recently showing additional slippage in manufacturing activity (to a 26-year low), a sharp decline in construction spending, and another setback in nonmanufacturing. Add to this, expectations for a weak holiday shopping season and for new turmoil in the housing and automobile industries and it is not hard to make a case that the current quarter could see a drop in the U.S. gross domestic product of 3% to 5%. We face several difficult quarters up ahead. Our sense is that the first and second quarters of 2009 will see declines in business activity of 2% to 3%, as the broad contraction in the economy drones on for a possible six to nine months more. At this point, none of the consumer and industrial markets that we view as critical to a sustained revival in economic activity (such as the housing, retail, auto, and manufacturing sectors) appears to be even close to bottoming out. Challenges will await the Obama Administration and the Federal Reserve. Those challenges are likely to center around the need for greater credit availability, more lending by the banks, the adoption of a program to revive the auto industry, the passage of an effective stimulus plan, and, possibly, further in-

terest rate cuts. How well these issues are addressed will go a long way toward determining the severity of the recession, which the National Bureau of Economic Research now claims has been under way since December of 2007. It is likely to be late next year before we see a durable economic comeback start to take hold. Once that recovery does unfold, it is likely to be led, ironically, by the housing market, which was the first area of the economy to falter and could be the first to revive thanks to falling home prices and lower mortgage rates. These are most uncertain times for investors, with optimism waxing and waning as economic data and earnings reports are issued on a daily basis. That may well be the pattern for some time as the stock market probes for a sustainable low amidst notably high volatility. Conclusion: We think the markets tug of war will eventually be won by the bulls, assuming steps to counter the recession are effective and efforts to calm a recently more jittery world bear fruit. Now, however, volatility in the stock market is likely to remain quite high as the recession traverses a painful path. Please refer to the inside back cover of Selection & Opinion for our Asset Allocation Models current reading.

3793 3796 3797 3797 3798 3798 3799 3799 3799 3799 3800

Model Portfolios: Recent Developments 3794

In Three Parts: Part 1 is the Summary & Index. This is Part 2, Selection & Opinion. Part 3 is Ratings & Reports. Volume LXIV, Number 16.
Published weekly by VALUE LINE PUBLISHING, INC. 220 East 42nd Street, New York, NY 10017-5891.
2008, Value Line Publishing, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for each subscribers own, noncommercial, internal use. No part of this publication may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. Officers, directors, employees and affiliates of Value Line, Inc. (VLI), and Value Lines investment-management affiliate, EULAV Asset Management, LLC (EULAV), a wholly-owned subsidary of Value Line, Inc., the parent company of Value Line Publishing, Inc. (VLPI), may own stocks that are reviewed or recommended in this publication. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. See back cover for important disclosures.

CLOSING STOCK MARKET AVERAGES AS OF PRESS TIME 11/25/2008 12/3/2008

Dow Jones Industrial Average Standard & Poors 500 N.Y. Stock Exchange Composite NASDAQ Composite NASDAQ 100 American Stock Exchange Index Value Line (Geometric) Value Line (Arithmetic) London (FT-SE 100) Tokyo (Nikkei) Russell 2000 8479.47 857.39 5375.36 1464.73 1142.58 1344.24 202.44 1217.97 4171.2 8323.93 443.18 8591.69 870.74 5405.55 1492.38 1166.20 1316.53 208.42 1266.84 4169.9 8004.10 453.76

%Change 1 week
+1.3% +1.6% +0.6% +1.9% +2.1% -2.1% +3.0% +4.0% 0.0% -3.8% +2.4%

%Change 12 months
-35.5% -40.9% -44.9% -43.4% -43.6% -44.0% -53.0% -43.6% -34.7% -48.8% -40.3%

Part 3 - Ratings & Reports

Ratings & Reports is the core of The Value Line Investment Survey with onepage reports on approximately 1,700 companies and one-page reports on approximately 100 industries. The company reports contain Timeliness, Safety and Technical ranks, our 3- to 5-year forecasts for stock prices, income and balance sheet data, as much as 17 years of historical data, and our analysts commentaries. They also contain stock price charts; quarterly sales, earnings, and dividend information; and a variety of other very useful data. Each page in this section is updated every 13 weeks. When important, and often unforeseen, news occurs during these 13 week intervals, a Supplementary Report (appearing in the back section of Ratings and Reports) is published. If there is a Supplementary Report, its location will be shown in the far left hand column of the Summary & Index, near the company name. (Two stars HH indicate that the Supplementary Report is in the current week's issue.)
THE

Selection & Opinion

ALUE LINE
Investment Survey
www.valueline.com
PAGE

Part 3

ISSUE 3
Pages 396-538
File in the binder in order of issue number, removing previous issue bearing the same number.

Ratings & Reports

PAGE

December 12, 2008

ESPECIALLY NOTEWORTHY:
In this weeks issue, old friends MDU Resources (page 438) and NiSource (page 452) move into the Natural Gas (Diversified) Industry and the Gas Utility Industry, respectively. EMS Technologies (page 496) satellite communications line is benefiting from strong demand in its commercial and military markets. Annual dividend growth at New Jersey Resources reached 10% with its latest payout, pointing to a higher level of earnings. Turn to page 450. Exxon Mobil (page 401) is bringing along large oil projects with the aim of capitalizing on the rising use of transportation fuels in developing nations. A shift in trading conditions has prompted Williams Cos. to look at possibly separating one or more of its three natural gas related business units. See page 533. Sigma-Aldrichs stable and diverse client list should help allow the specialty chemicals maker to weather the recession. Page 484. Expansion projects augur well for growth at pipeline operator TransCanada (page 426).
Foundation Coal Holdings, Inc. ....... 515 Joy Global Inc. .................................. 516 Massey Energy Co. ........................... 517 Peabody Energy Corp. ...................... 518 Penn Virginia Resource Partners .... 519 OIL/GAS DISTRIBUTION INDUSTRY ............................................. 520 Boardwalk Pipeline Partners L.P. ... 521 Buckeye Partners L.P. ...................... 522 Clean Energy Fuels Corp. ................ 523 Enbridge Inc. .................................... 524 Energy Transfer Partners, L.P. ....... 525 Kinder Morgan Energy Partners ..... 526 Magellan Midstream Partners L.P. . 527 Plains All American Pipeline L.P. .... 528 Southern Union Co. .......................... 529 Spectra Energy Corp. ....................... 530 Suburban Propane Partners L.P. .... 531 TEPPCO Partners, L.P. .................... 532 Williams Cos. .................................... 533 SUPPLEMENTARY REPORTS .......... 538

PETROLEUM (INTEGRATED) INDUSTRY ............................................. 397 BP p.l.c. (ADR) ................................. 398 Chevron Corp. ................................... 399 ConocoPhillips .................................. 400 Exxon Mobil Corp. ............................ 401 Frontier Oil Corp. ............................. 402 Hess Corp. ......................................... 403 Holly Corp. ........................................ 404 Marathon Oil Corp. .......................... 405 Murphy Oil Corp. ............................. 406 Occidental Petroleum ....................... 407 Petroleo Brasileiro SA (ADR) ........ 408 Repsol-YPF (ADR) .......................... 409 Royal Dutch Shell A ........................ 410 Sunoco, Inc. ........................................ 411 Tesoro Corp. ...................................... 412 Total (ADR) ....................................... 413 Valero Energy Corp. ......................... 414 CANADIAN ENERGY INDUSTRY ..... 415 Canadian Natural Resources Ltd. ... 416 EnCana Corp. ................................... 417 Imperial Oil Ltd. .............................. 418 Nexen, Inc. ........................................ 419 Pengrowth Energy ............................ 420 Petro-Canada Variable Vtg. ............. 421 Provident Energy ............................. 422 Suncor Energy Inc. ........................... 423 Talisman Energy Inc. ....................... 424 TransAlta Corp. ................................ 425 TransCanada Corp. .......................... 426 NATURAL GAS (DIVERSIFIED) INDUSTRY ............................................. 427 Cabot Oil & Gas ............................... 428 Chesapeake Energy Corp. ................ 429 Crosstex Energy Inc. ........................ 430 Devon Energy Corp. ......................... 431 Dynegy, Inc. A ................................. 432 EOG Resources, Inc. ......................... 433 El Paso Corp. .................................... 434 Energen Corp. ................................... 435 Enterprise Products Partners L.P. .. 436 Equitable Resources, Inc. ................ 437 MDU Resources Group, Inc. ............ 438 National Fuel Gas ............................ 439 Newfield Exploration Co. ................. 440 ONEOK, Inc. ..................................... 441 Questar Corp. ................................... 442 Quicksilver Resources ...................... 443 Southwestern Energy ....................... 444 XTO Energy, Inc. .............................. 445 NATURAL GAS UTILITY INDUSTRY ............................................. 446 AGL Resources, Inc. ......................... 447 Atmos Energy Corp. ......................... 448 Laclede Group ................................... 449 New Jersey Resources ...................... 450 Nicor, Inc. .......................................... 451 NiSource Inc. .................................... 452

Northwest Natural Gas ................... 453 Piedmont Natural Gas ..................... 454 South Jersey Industries, Inc. ........... 455 Southwest Gas .................................. 456 UGI Corp. .......................................... 457 WGL Holdings, Inc. .......................... 458 CHEMICAL (SPECIALTY) INDUSTRY ............................................. 459 Airgas, Inc. ........................................ 460 American Vanguard Corp. ............... 461 Arch Chemicals, Inc. ........................ 462 Ashland, Inc. ..................................... 463 Avery Dennison Corp. ...................... 464 Cabot Microelectronics Corp. ........... 465 Ceradyne Inc. .................................... 466 Chemtura Corp. ................................ 467 Ecolab, Inc. ....................................... 468 Ferro Corp. ........................................ 469 Fuller (H.B.) ...................................... 470 Intl Flavors & Fragrances ............... 471 Lubrizol Corp. ................................... 472 Minerals Technologies, Inc. ............. 473 NewMarket Corp. ............................. 474 OM Group, Inc. ................................. 475 Park Electrochemical ....................... 476 Penford Corp. .................................... 477 Praxair, Inc. ...................................... 478 Quaker Chemical .............................. 479 RPM Intl ........................................... 480 Rohm and Haas ................................ 481 Schulman (A.), Inc. ........................... 482 Sherwin-Williams ............................. 483 Sigma-Aldrich ................................... 484 SurModics, Inc. ................................. 485 Symyx Technologies Inc. .................. 486 Tredegar Corp. .................................. 487 Valspar Corp. .................................... 488 Westlake Chemical Corp. ................. 489 WIRELESS NETWORKING INDUSTRY ............................................. 490 American Tower A ........................... 491 Applied Signal Technology, Inc. ....... 492 Brightpoint, Inc. ............................... 493 Crown Castle Intl Inc. ..................... 494 DSP Group, Inc. ................................ 495 EMS Technologies, Inc. .................... 496 Echelon Corp. ................................... 497 InterDigital, Inc. .............................. 498 Intermec, Inc. ................................... 499 Itron, Inc. .......................................... 500 Palm, Inc. .......................................... 501 Powerwave Technologies, Inc. ......... 502 RF Micro Devices, Inc. ..................... 503 Research In Motion Ltd. .................. 504 SBA Communications ....................... 505 Smith Micro Software, Inc. .............. 506 ViaSat, Inc. ....................................... 507 Wind River Systems, Inc. ................. 508 Zebra Technologies Corp. ................. 509 COAL INDUSTRY ................................. 510 Alpha Natural Resources Ltd. .......... 511 Arch Coal, Inc. .................................. 512 Bucyrus Intl ..................................... 513 CONSOL Energy, Inc. ...................... 514

Rank 1 (Highest) for Timeliness. Rank 2 (Above Average).

In three parts: Part 1 is the Summary & Index. Part 2 is Selection & Opinion. This is Part 3, Ratings & Reports. Volume LXIV, No. 16 Published weekly by VALUE LINE PUBLISHING, INC. 220 East 42nd Street, New York, NY 10017-5891
2008, Value Line Publishing, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for each subscribers own, non-commercial, internal use. No part of this publication may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.

See back cover for important disclosures.

Ratings & Reports

Every week subscribers receive a new Issue of Ratings & Reports containing approximately 135 company reports grouped by industry and a smaller number of industry reports. The industry reports precede the reports on the companies in that same industry. Over the course of three months, revised reports are issued on all approximately 1,700 companies and nearly 100 industries.

II: Planning an Investment Strategy:

When planning an investment strategy, it is important to consider a large number of factors, including such things as your age, current financial situation, and risk tolerance. Of course, there are many other factors to think about, but the point is that you should not simply sit down and start picking securities. We have created a workbook called Planning an Investment Strategy that you should read before taking any portfolio action. As a quick summary, you should diversify your portfolio across both asset classes (i.e., stocks, bonds, and foreign securities) and within asset classes (i.e., owning a variety of stocks and bonds). In addition, you do not have to handle every portion of your portfolio. Instead, you might hire someone else to handle the components that you do not have the desire or experience to oversee. An example of this would be to buy a diversified fixed-income mutual fund for the bond portion of your portfolio, while maintaining a collection of stocks yourself. The right mix of outsourcing and personal direction is an individual decision, but in the end you should create a portfolio that is hopefully both profitable and enjoyable to manage. Again, we encourage you to take the time to read through the Planning an Investment Strategy workbook so that you can start your portfolio on a solid foundation.

III: Creating a List of Stocks for Further Research:

Once you have created a foundation portfolio, most likely consisting of a collection of asset-class baskets, you will need to find securities to fill those baskets. There are many ways to use The Value Line Investment Survey to find the equities that are most appropriate for you needs. There are approximately 1,700 stocks in our coverage universe, so opening the first issue and starting to examine each stock report in search of the few you want to own would be a time consuming and, frankly, nearly impossible task. To assist our readers in creating short lists of stocks for further consideration, we included a number of stock screens in the back of each Summary & Index. The screens are updated weekly and cover a broad range of investment options, including Timely Stocks in Timely Industries, Conservative Stocks, Highest Yielding Stocks, and Stocks with High 3- to 5-Year Appreciation Potential. A description of the screens is provided if the title of a screen is not selfexplanatory. There are, of course, many more screens than the ones listed here, so you should take a look at the pages in the back of the Summary & Index to get a feel for which ones will best fit your specific needs. Regardless of which screens you choose to use, this approach will provide you with a short list of companies to research.

For those who want more advice than a static screen, we have also created three model portfolios: Portfolio I (Stocks with Above-Average Year-Ahead Price Potential), Portfolio II (Stocks for Income and Potential Price Appreciation) and Portfolio III (Stocks with Long-Term Price Growth Potential). These portfolios are overseen by Value Line analysts and are updated weekly in the Selection & Opinion section. On a quarterly basis, a more in-depth review is provided detailing the most recent performance of each portfolio. These portfolios offer another convenient starting point for selecting stocks for inclusion in your own portfolio. On an ongoing basis, we also provide stock screens and Stock Highlights in the Selection & Opinion section. The screens go beyond those included on a weekly basis in the Summary & Index and often provide a different and unique view of an investment approach. The Stock Highlights are a more indepth review of a company that we believe merits a second look. Although these two options may not be the best starting point for you, they can play an important role in providing new and interesting investment ideas down the road.

IV: Researching a Stock Using the Value Line Page

A sample Value Line report was included with your welcome package. The numbers below reference back to the sample page. To start studying a stock, we suggest that you concentrate on various features found on every company page of Ratings & Reports. Begin by using the Timeliness, Safety and Technical ranks that appear in the upper left corner of each page 1 . Next, look at the analysts commentary in the bottom half of each report 17 . Then look at our various forecasts for financial data. Estimated financial data is shown on the right side (bold italic print) of the Statistical Array 15 . Growth rates are in the Annual Rates box 23 . A stock's Target Price Range is on the right-hand side of the graph 11 , and 3- to 5-year stock price Projections are in the projections box 29. Finally, go to the historical financial data appearing in the left side of the Statistical Array 26 . Illustrations and more detail follow.

Value Line Ranks (see Timeliness

on the sample page)

TIMELINESS 2 Lowered 5/1/09 TIMELINESS The Timeliness rank is Value Lines measure of the expected price SAFETY SAFETY 1 New 7/27/90 performance of a stock for the coming six to 12 months relative to our TECHNICAL TECHNICAL 4 Lowered 5/22/09 approximately 1,700 stock universe. Stocks ranked 1 (Highest) and 2 BETA .60 (1.00 BETA .60 (1.00 = Market) (Above Average) are likely to perform best relative to the approximately 1,700 stocks we follow. Stocks ranked 3 are likely to be average performRanks Box ers. Stocks ranked 4 (Below Average) and 5 (Lowest) are likely to underperform stocks ranked 1 through 3 in Value Line's universe.
At any one time, there are 100 stocks ranked 1; 300 ranked 2; approximately 900 ranked 3; 300 ranked 4; and 100 ranked 5.

2 1 4

The most important factor in determining the Timeliness rank is earnings growth. Companies whose earnings growth over the past 10 years has been greater than their stocks price appreciation tend to have
4

high scores. In addition, the ranks take into account a stock's recent price performance relative to all approximately 1,700 stocks in the Value Line universe. A company's recent quarterly earnings performance and any recent earnings surprises caused because a company reported results that were significantly better or worse than expected are also factors. These are all combined to determine the Timeliness rank.

Companys Financial Strength Stocks Price Stability Price Growth Persistence Earnings Predictability

A++ 100 45 100

Financial/Stock Price Data

Just one word of caution. Stocks ranked 1 for Timeliness are often more volatile than the overall market and tend to have smaller capitalizations (the total value of a company's outstanding shares, calculated by multiplying the number of shares outstanding by the stock's price per share). Conservative investors may want to select stocks that also have high Safety ranks because they are more stable issues.

Safety
The Safety rank is a measure of the total risk of one stock compared to all others in our approximately 1,700 stock universe. As with Timeliness, Value Line ranks each stock from 1 (Highest) to 5 (Lowest). However, 5 unlike Timeliness, the number of stocks in each category from 1 to 5 may vary. The Safety rank is derived from two measurements (weighted equally) found in the lower right hand corner of each page 19 : a Company's Financial Strength and a Stock's Price Stability. Financial Strength is a measure of a company's financial condition, and is reported on a scale of A++ (highest) to C (lowest). The largest companies with the strongest balance sheets get the highest scores. Price Stability is based on a ranking of the standard deviation (a measure of volatility) of weekly percent changes in the price of a company's own stock over the last five years, and is reported on a scale of 100 (highest) to 5 (lowest) in increments of 5. Generally speaking, stocks with Safety ranks of 1 and 2 are most suitable for conservative investors. A stock's Price Growth Persistence and a company's Earnings Predictability are also included in the box above, but do not factor into the Safety rank. However, they are useful statistics. Price Growth Persistance is a measure of the consistency of relative stock price growth over the past 10 years. Earnings Predictability is a measure of the reliability of an earnings forecast.

Technical
The Technical rank is primarily a predictor of a stock's short term (three to six months) relative price change. It is based on a proprietary model which examines 10 relative price trends for a particular stock over different periods in the past year. It also takes into account the price volatility of each stock. The Technical ranks also range from 1 (Highest) to 5 (Lowest). At any one time, about 100 stocks are ranked 1; 300 ranked 2; 900 ranked 3; 300 ranked 4; and 100 ranked 5.

Beta
Beta is a measure of the volatility of a stock relative to the overall stock market and is calculated by Value Line. A Beta of 1.0 suggests that a stock will move up and down in roughly lock-step with the market, so that a 3% increase or fall in the broader market would likely be accompanied by a similar percentage move in the stock. A Beta higher than 1.0 means a stock tends to move more than the market, while a

Beta lower than 1.0 suggest that the stock in question will move in a muted relationship to a move in the market.

Industry Timeliness

Value Line also publishes Industry ranks which show the Timeliness of each industry. The Industry ranks indicate how Value Line believes the prices of stocks within 90 or more industries will perform relative to each other. These ranks are updated weekly and Analyst's Commentary published on the front cover and on page 24 of the Summary & Index. They also appear at the top of each Industry Report in Ratings & Reports. The Industry rank is calculated by averaging the Timeliness ranks of each of the stocks assigned a Timeliness rank in a particular industry.

Johnson & Johnsons operating margin rebound has accelerated lately. Thanks mainly to cost-cutting measures and synergies from acquisition consolidation, the gross margin expanded 20 basis points, year to year, in the March, 2009 period and SG&A expenses, as a percentage of revenues, decreased almost one percentage point. Notably, new standardization measures at the Pharmaceutical and Medical Device businesses helped generate a total of $1.6 billion in annual savings. Due partly to tougher comparisons, management indicated that operating margin improvement over the balance of this year would most likely be far more modest; we estimate an average increase of about onehalf percentage point in 2009. Currency rates and a pullback in global consumer spending will likely weigh on results in the coming quarters. Almost half the companys revenues are generated in foreign markets, and the relative strength of the U.S. dollar was the main factor behind the 7.2% revenue decline, year to year, in 2009s first quarter. Also, some of the Consumer divisions products, which have a discretionary

component, were hurt by the economic malaise in many markets. These factors will most likely continue to depress earnings in the next two quarters. All told, despite the first quarters operating margin rebound and a lower stock count, share net will likely be little changed this year. The companys longer-term earnings growth prospects are broad based. Three catalysts behind our forecast of earnings advances of 8%, on average, in the 3 to 5 years subsequent to 2009 are J&Js ongoing acquisition program, expansion opportunities in emerging markets, and its promising late-stage pharmaceutical pipeline. Thanks to the first factor, which is funded by free cash flow running at $7.5 billion, J&J recently acquired Mentor, as well as Omrix Biopharmaceuticals and several foreign-based firms. Their medical expertise has enhanced the companys sizable R&D program. This good-quality stock is likely to outpace the market averages over the coming six to 12 months. Also, on a risk-adjusted basis, it offers attractive total return potential to 20122014 . David R. Cohen May 29, 2009

Analysts Commentary (see 17 on the sample page)

Next, look at the analysts written commentary in the lower half of the page. Many readers think this is the most important section of the page. In the commentary, the analyst discusses his/her expectations for the future. There are times when the raw numbers dont tell the full story. The analyst uses the commentary to explain why the forecast is what it is. The commentary is also particularly useful when a change in trend is occurring or about to occur. As an example, a stock may have a poor Timeliness rank but the analyst thinks earnings could turn around in the future. In this case, the analyst may use the commentary to explain why he/she thinks conditions are likely to get better, thus giving the subscriber insight into what is happening and why.
( )
VALUE LINE PUB., INC.

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
5.50 6.12 7.27 8.11 8.41 8.80 9.88 10.47 10.83 12.23 14.10 15.94 16.98 18.43 21.51 23.02 22.45 24.10 .93 1.06 1.26 1.46 1.62 1.83 2.03 2.27 2.46 2.85 3.36 3.84 4.25 4.60 5.23 5.70 5.70 6.15 .69 .78 .93 1.09 1.21 1.34 1.49 1.70 1.91 2.23 2.70 3.10 3.50 3.76 4.15 4.57 4.55 4.90 .25 .28 .32 .37 .43 .49 .55 .62 .70 .80 .92 1.10 1.28 1.46 1.62 1.80 1.93 2.05 .38 .36 .48 .52 .52 .54 .62 .59 .57 .71 .76 .73 .88 .92 1.04 1.11 1.00 1.10 2.17 2.77 3.49 4.07 4.59 5.06 5.83 6.76 7.95 7.65 9.05 10.71 12.73 13.59 15.25 15.35 16.50 18.00 2571.9 2572.0 2590.7 2665.0 2690.3 2688.1 2779.4 2781.9 3047.2 2968.3 2968.0 2971.0 2974.5 2893.2 2840.2 2769.2 2700.0 2640.0 15.4 14.8 18.5 22.4 24.9 28.1 31.6 26.4 27.2 25.9 19.4 18.1 18.5 16.6 15.4 14.3 Bold figures are Value Line .91 .97 1.24 1.40 1.44 1.46 1.80 1.72 1.39 1.41 1.11 .96 .99 .90 .82 .86 estimates 2.4% 2.4% 1.9% 1.5% 1.4% 1.3% 1.2% 1.4% 1.3% 1.4% 1.8% 2.0% 2.0% 2.3% 2.5% 2.8%
CAPITAL STRUCTURE as of 3/29/09 Total Debt $14,074 mill. Due in 5 Yrs $4,900 mill. LT Debt $8,052 mill. LT Interest $445 mill. (16% of Capl) Leases, Uncapitalized Annual rentals $183.0 mill. Pension Assets-12/08 $7,677 mill. Oblig. $11,923 mill. Pfd Stock None Common Stock 2,755,566,000 shs. as of 4/26/09 MARKET CAP: $155 billion (Large Cap) CURRENT POSITION 2007 2008 3/29/09 ($MILL.)

12-14
29.95 7.75 6.20 2.50 1.25 26.00 2460.0 16.0 1.05 2.4% 75200 30.3% 3100 16000 24.5% 21.3% 22000 6000 64000 23.0% 25.0% 15.0% 40%

Sales per sh A Cash Flow per sh Earnings per sh B Divds Decld per sh C Capl Spending per sh Book Value per sh D Common Shs Outstg E Avg Annl P/E Ratio Relative P/E Ratio Avg Annl Divd Yield Sales ($mill) A Operating Margin Depreciation ($mill) Net Profit ($mill) Income Tax Rate Net Profit Margin Working Capl ($mill) Long-Term Debt ($mill) Shr. Equity ($mill) Return on Total Capl Return on Shr. Equity Retained to Com Eq All Divds to Net Prof

27471 27.0% 1444.0 4209.0 27.5% 15.3% 5746.0 2450.0 16213 22.9% 26.0% 16.8% 35%

29139 27.4% 1515.0 4800.0 27.5% 16.5% 8310.0 2037.0 18808 23.3% 25.5% 16.4% 36%

33004 28.8% 1605.0 5885.0 28.2% 17.8% 10429 2217.0 24233 22.5% 24.3% 15.8% 35%

36298 31.2% 1662.0 6810.8 29.0% 18.8% 7817.0 2022.0 22697 27.8% 30.0% 19.5% 35%

41862 31.3% 1869.0 8096.6 30.2% 19.3% 9547.0 2955.0 26869 27.4% 30.1% 19.9% 34%

47348 31.6% 2124.0 9298.0 27.6% 19.6% 13393 2565.0 31813 27.3% 29.2% 19.0% 35%

50514 30.6% 2093.0 10545 24.8% 20.9% 18759 2017.0 37871 26.5% 27.8% 17.8% 36%

53324 61095 28.7% 29.4% 2177.0 2777 11133 12085 23.3% 22.1% 20.9% 19.8% 3814.0 10108 2014.0 7074.0 39318 43319 27.1% 24.1% 28.3% 27.9% 17.5% 17.1% 38% 39%

63747 29.5% 2832 12949 23.5% 20.3% 13525 8120 42511 26.4% 30.5% 18.6% 39%

60600 30.0% 2875 12580 24.5% 20.8% 15000 7800 44500 24.5% 28.5% 16.5% 42%

63600 30.0% 2925 13250 24.5% 20.8% 17000 7400 47500 24.5% 28.0% 16.0% 42%

Statistical Arrray

Value Lines Financial Data (see 15 and 26 on the sample page)

In the Statistical Array in the center of the report (where most of the numbers are), Value Line provides both historical data and financial projections.

Financial Estimates (see 15 and 22 on the sample page)

The estimates of sales, earnings, net profit margins, income tax rates, and so forth are all derived from spread sheets maintained on every company and printed in bold italics. The numbers are based on an analysts latest thinking about where a company may be in the future. Our analysts regularly review their projections and discuss them with a company's management. Afterwards, they make whatever adjustments they believe are warranted.
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Historical Financial Data (see 26 on the sample page)

Many investors like to use the Statistical Array to do their own analysis. They, in particular, use the historical data in the center of each report to see how a company has been doing over a long time frame. It 's worth pointing out that while all of the data are important, different readers find different data items to be most useful. The numbers are probably most helpful in identifying trends. For example, look at sales per share to see if they have been rising for an extended period of time. Look at operating margins and net profit margins to see if they have been expanding, narrowing or staying flat. Also check the percentages near the bottom to see if the Return on Total Capital or the Return on Shareholders' Equity have been rising, falling or remaining about the same.

Annual Rates Of Change (see 23 on the sample page)

At this point, it may be helpful to look at the Annual Rates box in of change (per sh) 10 Yrs. 5 Yrs. to 12-14 Sales 9.5% 11.0% 6.0% the left-hand column. This box shows the compound annual Cash Flow 12.0% 12.5% 7.0% Earnings 13.0% 13.0% 7.0% growth percentages for sales, cash flow, and other items for the Dividends 14.5% 15.0% 7.5% Book Value 12.5% 12.5% 10.0% past 5 and 10 years and also Value Line's projections of growth for each item for the coming 3 to 5 years. Trends are also important here. Check whether growth has been increasing or slowing and Annual Rates Box to see if Value Line's analyst thinks it will pick up or fall off in the future. (Specific estimates for various data items for three to five years in the future can be found in bold italicized type in the far right hand column of the Statistical Array.)
ANNUAL RATES Past Past Estd 06-08

Target Price Range and 3- to 5-year Projections (see 11 and 29 on the sample page)
High: Low: 44.9 31.7 53.4 38.5 53.0 33.1 61.0 40.3 65.9 41.4 59.1 48.1 64.3 49.3 70.0 59.8 69.4 56.7 68.8 59.7 72.8 52.1 61.0 46.3
LEGENDS 13.5 x Cash Flow p sh . . . . Relative Price Strength 2-for-1 split 6/96 2-for-1 split 6/01 Options: Yes Shaded area: prior recession Latest recession began 12/07

Target Price Range 2012 2013 2014

160 120 100 80 60 50 40 30 20 15

2-for-1

% TOT. RETURN 4/09

Percent shares traded 9 6 3
THIS STOCK VL ARITH. INDEX

1 yr. 3 yr. 5 yr.

-19.6 -3.3 9.2

-25.8 -24.7 2.8

Target Price Range (3 to 5 years)

In the upper right-hand section of each report is a Target Price Range for each stock. This is the range in which the price is likely to fall during the period 3 to 5 years hence. The range is based on the analyst's projections in the period 3-5 years out for earnings per share multiplied by the estimated price/earnings ratio in the Statistical Array for the same period. The width of the high-low range depends on the stock's Safety rank. A stock with a high Safety rank has a narrower range, one with a low rank, a wider

one. In the left hand column of each report, there is also a box which contains 3- to 5-year Projections for a stock price. There you can see the potential high and low average prices we forecast, the % price changes we project, and the expected compound annual total returns (price appreciation plus dividends). To make these calculations, analysts compare the expected prices out 3 to 5 years into the future (as shown in the Target Price Range and Projections box) with the recent price shown at the top of the report.

Investors whose primary goal is long-term price appreciation should study the 3- to 5-year projections carefully and choose stocks with above-average appreciation potential. For comparative purposes, you can find the Estimated Median Price Appreciation Potential for all approximately 1,700 stocks on the front page of the Summary & Index.

V: Examining a Value Line Page in more detail

In the following section, we are going to examine an actual Value Line page, with the objectives of interpreting the array of statistical data presented and weighing the data and the accompanying comment against your needs. We have chosen for examination a report on Johnson & Johnson, a large and well-known manufacturer of health care products.

Putting Data in Perspective

Looking at the top of the page, we can see that Johnson & Johnsons stock price in May 2009 was $55.89 a share (item 5 on the sample page). By itself, the stock price means very little. In the line below the price, annual high and low prices for each year from 1998 through late 2008 are indicated. Below the high and low annual prices is a price chart (graph) that shows monthly price ranges for essentially the same period, along with other useful information that we will discuss below. We note here, though, that while Johnson & Johnson stock has traded in a relatively narrow range for over six years, it has still climbed about 75% from its low of 31.7 in 1998 (adjusted for stock a split in 2001). At the current quotation, is the stock undervalued or overvalued? The fact that the cash flow line is well above the price of the stock indicates that it appears to be undervalued. Also, sales per share, cash flow per share, earnings per share, and book value per share are all near historical highs, as can be seen in the Statistical Array (items 15 and 26 on the sample page). Price Earnings RatioThis is probably the most widely used measure of stock valuation. Value Line shows a variety of P/E ratios on every company page, as discussed below: The P/E ratio on the very top of the Value Line page (item 6 on the sample page). This is calculated by dividing the recent price of the stock by the total of the last six months of earnings and the next six months of estimated earnings. The Relative P/E ratio (item 8). This compares the P/E of one stock with the median of estimated P/E ratios of all stocks under Value Line review. A relative P/E of more than 1 indicates that a stocks P/E ratio is currently higher than that of the Value Line universe; a P/E of less than 1 indicates that this stocks P/E is less than the Value Line average. The Trailing P/E ratio (item 7). This is calculated by dividing the recent price of the stock by the past 12 months of actual (reported) earnings. This is the figure shown in most newspapers. The Median P/E ratio (item 7). This is the average annual P/E ratio of a stock over the past 10 years, with certain statistical adjustments made for unusually low or high ratios.

The Average Annual P/E ratio (items 15 and 26). This figure is calculated by dividing the average price for each year by the actual reported earnings for the same year and is shown in the Statistical Array. The Relative (Annual) P/E ratio (items 15 and 26). This figure is calculated by dividing the Average Annual P/E of a stock with the Average Annual P/E of all stocks under Value Line review in the same year. To gauge the significance of the recent price of a stock, the reader must look at the price in relation to a variety of data. As far as P/Es are concerned, the current P/E ratio and relative P/E ratio for Johnson & Johnsons stock, are below those of most stocks in the Value Line universe. However, this is not expected to be the case during the 2012-2014 period. The current below-average valuations reflect the fact that medical supply stocks are currently not in favor. Low P/E ratios may mean that the stock is underpriced, unless there are factors indicating that there will be a significant decline in the companys fundamentals. Is this the case with Johnson & Johnson? Probably not, since management has been very vigilant in its efforts to maximize returns from its businesses, and the Value Line analyst is expecting continued profit growth over the three to five years subsequent to 2009. Johnson & Johnsons relative P/E ratio of 0.84 (item 8), a modestly lower valuation than found in the average stock followed by Value Line, likely reflects the fact the companys upward earnings trend over the past 15 years has recently stalled. The Dividend Yield (item 10 in the right top corner of the sample page) shows the expected return from cash dividends on the stock over the next 12 months, as a percentage of the recent price. Johnson & Johnsons yield of 3.5% is above the median of all dividend-paying stocks in the Value Line Universe. (The median is shown each week on the cover of the Summary & Index section.) We also see that the company has increased the dividend in every year since 1993, as shown in line four of the Statistical Array in the center of our report, and Value Lines analyst thinks additional increases are forthcoming. Many investors view regular increases in a dividend very positively.

The Price Chart

Next, look at Johnson & Johnsons price chart (or graph) at the top of the report. The first thing to look at is the price history, shown by the small vertical bars in the center of the graph. Those bars show the high and low monthly prices for the stock (adjusted for any subsequent stock splits or dividends). Looking at the bars, you can see that the stock price was in a solid uptrend from 1997 through 1999. After falling in early 2000, the price then moved higher through early 2002. Since then, it has generally traded in a broad range between 50 and 70. Now look at the cash flow line, the solid line running from 1997 through the middle of 2008, which is more fully described below. The dashed line from mid-2008 to mid-2010, which is an extension of the cash flow line, is Value Lines projection of the line for those years. For most of the past 12 years, Johnson & Johnsons stock has traded above the cash flow line. In the past two-and-a-half years, however, the stock has traded below the line. Finally, look at the Relative Strength Price line, the faint small dotted line, usually toward the bottom of the chart. This shows the relative performance of Johnson & Johnson stock versus the entire universe of Value Line stocks; when the Relative Strength Price line is rising, it means a stock is acting better than the universe. When it is falling, a stock is doing worse than the Value Line universe.

At the very bottom of the chart, we show volume of trading each month (item 14) as a percent of total shares outstanding. The Legends box (item 2) in the upper left of the price chart contains, among other things, information on the cash flow multiple, a record of stock splits, and whether or not there are options traded. The Target Price Range (item 11) in the upper right corner of the price chart indicates where Value Lines analyst believes the stock is most likely to be selling in the 2012-14 period. This box should be viewed in conjunction with the Projections box (item 29) near the top left-hand corner of the page, which also gives our 3- to 5-year projections. For Johnson & Johnson, we expect the average price to hover between 90 and 110, which would be between 60% and 95% above the current level. Just above the 2012-14 PROJECTIONS box is a section containing the Value Line Timeliness, Safety, and Technical ranks, plus a Beta calculation. Johnson & Johnsons Beta of .55 reveals that this stock is likely to move up and down much more slowly than the typical stock on the New York Stock Exchange. If you think that the stock market will go up, you want to invest in stocks with high Betas. If you think the market will go down or are looking for stability, a stock like Johnson & Johnson, with a low Beta is the place to be.

The Cash Flow Line

The price chart at the top of the Johnson & Johnson page contains, among other things, a monthly price history for the stock (the vertical bars) overlaid by a solid line that we call the cash flow line (sometimes also called the Value Line). To plot the line, we multiply cash flow per share (net income plus depreciation and amortization divided by the number of shares outstanding at the end of the year) by a number (multiple) determined by our analyst. The goal is to create a line that most closely matches a companys stock price history and also fits the projected 3- to 5-year Target Price Range. In the case of Johnson & Johnson, the cash flow multiple is now 13.5. (The multiple can, and often does, change over time.) The concept of a cash flow multiple is not too different from that for a Price/Earnings multiple (or ratio). The difference here is that instead of dividing the recent price of a stock by 12 months of earnings to create a P/E multiple, we divide the recent price by the total of 12 months of earnings plus 12 months of depreciation (and amortization, if there is any). There is evidence that some stocks will generally trade at a price close to the cash flow line. In those cases when a stock is trading above the cash flow line, it will often move back down toward the cash flow line. When it is trading below, it will often do the opposite. In some cases, a stock may trade above or below the cash flow line for considerable periods of time.

Historical Results and Estimates

For each of the approximately 1,700 companies Value Line follows, we usually present per-share data going back 17 years in the Statistical Array in the center of each report. The historical data (item 26) appear on the left side and are presented in regular type. We also project statistical data (item 15) for the next fiscal year, as well as three to five years into the future. These projections are presented in bold italics. Now look at a list of items in the Statistical Array (items 15 and 26). Sales per share, in the top line, is an important series. When earnings per share are depressed because of

10

poor net profit margins, a high level of sales per share can suggest the potential for an earnings recovery. It would be disconcerting, however, if sales per share declined in tandem with earnings per share. Cash flow per share (second line), as commonly used by analysts, is the sum of reported earnings plus depreciation, less any preferred dividends, calculated on a per-share basis, also now includes stock option expense. It is an indicator of a companys internal cash-generating abilitythe amount of cash it earns to expand or replace plant and equipment, to provide working capital, to pay dividends, or to repurchase stock. Johnson & Johnsons cash flow per share has expanded significantly since 1993. Earnings per share (third line) are shown by Value Line as they were reported to stockholders, excluding nonrecurring items and adjusted for any subsequent stock splits or stock dividends. According to current accounting guidelines, companies now report earnings two ways. The first is basic earnings per share, which is the earnings available to common shareholders divided by the weighted average number of shares outstanding for the period. The second is diluted earnings per share, which reflects the potential dilution that could occur if securities or other contracts to issue common stock (like options and warrants) were exercised or converted into common stock. Value Line shows only one earnings figure in our statistical presentation; that figure is clearly identified in the footnotes (item 20), and it is almost always the diluted earnings figure. For Johnson & Johnson, earnings per share have expanded consistently over the past decade and a half. As indicated in footnote (B) (item 20) near the bottom edge of the report page, its earnings per share are now based on diluted shares outstanding. Dividends Declared per share (fourth line) are usually the highest, in proportion to earnings, at older and larger companies, which tend to have slower-than-average growth. Directors of growth-oriented companies more often than not prefer to pay small or token dividends, or none at all, so they can reinvest earnings in the business. Johnson & Johnson has regularly paid out 34% to 39% of its earnings in dividends and invested the remainder in the business and the percentage is likely to exceed 40% in the coming years. A payout of 25%-30% is generally typical of larger capitalization companies followed by Value Line. Capital Spending per share (fifth line) is the amount that a company spends on new plant and equipment. It doesn't include funds used for acquisitions of other companies. Book Value per share (sixth line) is common share-holders equity determined on a per-share basis. It includes both tangible assets, like plant and receivables and inventories, as well as intangibles, like the value of patents or brand names, known as goodwill. Any significant intangibles will normally be indicated in a footnote. If all assets could be liquidated at the value stated on the companys books, all liabilities such as accounts payable, taxes, and long-term debt paid, and all preferred stockholders compensated, the book value is what would be left for the common stockholders. The number of Common Shares Outstanding (seventh line) is also listed in the Statistical Array. Sometimes net income rises, but earnings per share do not, because the number of shares outstanding has increased. This may happen because a company is issuing stock to pay for acquisitions or to fund internal growth. As a result, sales and profits may soar, while per-share sales and earnings lag. On the other hand, when cash-rich companies buy their own shares, earnings per share can rise even if net income is stable. Johnson & Johnsons share base has declined in 2006, 2007, and 2008.

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The Average Annual P/E Ratio (eighth line) shows what multiple of earnings investors have been willing to pay for a stock in the past and the P/E ratio the analyst expects out 3 to 5 years. Johnson & Johnsons average annual P/E rose to unusually high levels in the late 1990s when drug and medical stocks were in favor; it has narrowed considerably more recently. The Relative P/E Ratio (ninth line) shows how the stocks price-earnings ratio relates to those of all stocks in the Value Line universe. Johnson & Johnsons relative P/E of 0.84 in May 2009 was modestly below that of the typical stock. However, its relative PE has often been much higher, and the Value Line analyst thinks it will be above average in the period to 2012-14. The Average Annual Dividend Yield (tenth line) is of special interest to conservative investors, many of whom are more concerned with income than with a stocks appreciation potential. Income-oriented investors should look for stocks with yields that are higher than the average shown each week in the center box of the front cover of the Summary & Index, but they should also look at the trend of dividends over time. Johnson & Johnsons dividend has been increased in each year shown on our page, and the analyst thinks it will continue to rise. Steady increases are very attractive for many investors. Investors should also look carefully at a companys Financial Strength to make certain that the company will be able to continue to pay the dividend. A good rule of thumb for conservative investors is to invest only in companies with Financial Strength ratings of at least B+.

Company Financial Data

The Sales figure (eleventh line) is the most common measure given when referring to a companys size. Johnson & Johnsons sales in 2009 are expected to be 2.2 times the amount recorded in 1999, a very strong performance. The Operating Margin (twelfth line) indicates what percentage of sales is being converted into operating income. (Operating income is total sales minus the cost of goods sold and selling, general and administrative expenses. It is also referred to as EBITDA, or earnings before interest, taxes, depreciation, and amortization.) At Johnson & Johnson, this figure peaked in 2005, and it is expected to rebound modestly in the next 3 to 5 years. Depreciation (thirteenth line) shows the amount charged against operating profits to reflect the aging of a companys plant and equipment . That number has risen quite steadily and is expected to continue to rise through 2012-14. Net Profit (fourteenth line) is the amount the company earned after all expenses including taxes, but excluding nonrecurring gains or losses and the results of discontinued operations. Usually, the higher the net, the higher the per-share earnings. Johnson & Johnsons net profit has grown considerably since 1999, and has risen in every year. Johnson & Johnsons Income Tax Rate (fifteenth line) was in the 27% to 30% range for many years. It has declined since 2003, and Value Lines analyst thinks it will remain lower in the future. Income tax rates will normally remain steady unless the federal tax rate changes in the U.S. or unless a company increases or decreases the percentage of business it does overseas, where tax rates are different.

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Net Profit Margin (sixteenth line) shows net income after taxes as a percentage of sales (or revenues). Here, the trend is the most important thing, with rising margins usually being favorable. It is often worthwhile to compare the net margin with the operating margin. Usually the two series move together, though not always. Depreciation charges, interest expense, income taxes, and other costs are deducted from (and other income added to) operating income in the determination of net profit. Where there is a disparity in the trends of the net and operating margins, it may be worth taking a second look. (If depreciation, interest charges, or tax rates move sharply in any direction, there will be an impact on net profits, and it would be worthwhile to try to determine why the change occurred.) Johnson & Johnsons Net Profit Margin reached a record level in 2005, and we expect the current level to improve modestly over the next 3 to 5 years. Working Capital (seventeenth line), the companys current assets less current liabilities, indicates the liquid assets available for running the business on a day-to-day basis. The higher a companys sales, the more working capital it typically has and needs. But we caution that a number of large companies with steady revenue streams no longer believe large amounts of working capital are necessary. In those cases, a negative working capital may be perfectly acceptable because a company can meet normal operating expenses from consistent cash receipts. Long-term Debt (eighteenth line) is the total debt due more than one year in the future. In the case of Johnson & Johnson, the amount is quite low relative to shareholders' equity. Shareholders Equity (nineteenth line), also known as net worth, is the total stockholders interest (preferred and common) in the company after all liabilities have been deducted from the companys total assets. All intangible assets such as goodwill, patents, and, sometimes, deferred charges are included in shareholders equity. Johnson & Johnsons equity has grown appreciably over the years, primarily from retained earnings. Return on Total Capital (twentieth line) measures the percentage a company earns on its shareholders equity and long-term debt obligations. When a companys return on total capital goes up, there should also be an increase in the return on shareholders equity (see below). If not, it simply means that the company is borrowing more and paying interest, but not earning more for the stockholders on their equity in the companys assets. Unless a company can earn more than the interest cost of its debt over time, the risk of borrowing is not worthwhile. Return on Shareholders Equity (twenty-first line) reveals how much has been earned (in percentage terms) every year for the stockholders (common and preferred). Higher figures are usually desirable, often indicating greater productivity and efficiency. Johnson & Johnsons percent earned on net worth reached a peak in 2008, and while it may well slip in coming years, it is likely to remain above average. Trends in both this ratio and the return on total capitaltwo key gauges of corporate performance say a great deal about the skill of management. Retained to Common Equity (twenty-second line) also known as the plowback ratio, is net income less all dividends (common and preferred), divided by common shareholders equity and is expressed as a percentage. It measures the extent to which a company has internally generated resources to invest for future growth. A high plowback ratio and rapidly growing book value are positive investment characteristics.

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All Dividends to Net Profit, or payout ratio, (twenty-third line) measures the proportion of a companys profits that is distributed as dividends to all shareholdersboth common and preferred. Young, fastgrowing firms reinvest most of their profits internally. Mature firms are better able to pay out a large share of earnings. Johnson & Johnson has been paying out 34% to 39% of its profits in the form of cash dividends. By way of comparison, the typical large company in the Value Line universe usually pays out about 25%-30% of its profits in dividends.

VI: A Hands on Tour of the Value Line Page

Now that you have had a quick overview of the most important aspects of the Value Line page, it is time to hunker down and actually use the data. You will find both explanations and questions to help you get a hands on feel for using a Value Line stock report. Each question has a blank line for you to place your answer. Note that you may need a calculator to find some of the answers. The questions are based on the sample page included with your welcome package. There is an answer sheet and a scoring guide at the end of the workbook, so you can see how much you have learned and the sections to which you may need to pay more attention. This is meant to be an educational and fun experience, so dont feel bad if you get something wrongsimply take some extra time to figure out what the right answer should have been. 1. Across the top of the page are: the companys name, followed by the stock exchange on which the stock is traded - usually the New York Stock Exchange (NYSE), American Stock Exchange (ASE), or NASDAQ (NDQ), and the ticker symbol, usually two to four letters used to identify a stock for trading purposes. Next comes the recent stock price (item 5). Johnson & Johnsons stock is traded on the ______________(1). Its ticker symbol is ____________(1a). 2. To the right of the recent price is the Value Line price/earnings ratio (item 6), often abbreviated as the P/E ratio. All price/earnings ratios are calculated by dividing the recent price of a stock by 12 months of share earnings. But there are some differences. Value Line calculates the ratio by dividing the recent price of a stock by the sum of the past 6months earnings per share and Value Lines estimate of the next six months estimated earnings per share. Value Line believes that the use of both past and future earnings provides the most realistic picture possible. At the time this report was written, Johnson & Johnsons earnings for the past and current quarter - the March and June 2009 quarters (in item 22) - would equal $2.38 a share ($1.26+$1.12). Value Line was estimating that earnings in the next six months - the September and December 2009 quarters (in item 22) - would total $2.17 a share ($1.12+$1.05). With a recent stock price of 55.89 and 12 months earnings per share of $4.55 ($2.38 + $2.17), what is the price/earnings ratio? ____________(2)

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3. The trailing price/earnings ratio (item 7) is calculated by dividing the current price of a stock by the earnings per share actually reported for the past 12 months. This is the number used in most newspapers; the newspapers use reported earnings because those are the only numbers available to them since they do not make forecasts as Value Line does. Johnson & Johnsons actual reported earnings in the past 12 months (the June, September, and December 2008 quarters plus the March quarter of 2009) were $4.57 a share ($1.17+$1.17+$.97+$1.26). What is the stocks trailing price/earnings ratio? __________(3) 4. The median price/earnings ratio (item 7) is the middle value of a companys P/E ratios over the past 10 years, with certain statistical adjustments. It shows the typical historical P/ E of a stock. (An investor cannot calculate a median P/E ratio without knowing the precise statistical adjustments Value Line uses.) 5. The relative P/E ratio (item 8) of a stock compares the P/E of one stock with the P/E of all the stocks in the Value Line universe of approximately 1,700 stocks. Our calculation of the relative P/E ratio is made by dividing Value Lines P/E of this company (item 6) by the median P/E of all of the approximately 1,700 stocks included in The Value Line Investment Survey. (The median P/E of all stocks can be found each week on the front cover of the Summary & Index section.) Value Lines calculated P/E for Johnson & Johnson, shown on the top of the page, is 12.3. The P/E of the Value Line universe of stocks at the time the Johnson & Johnson report was published was 14.6. What is Johnson & Johnsons relative P/E ratio? ____________(5) Whenever a stocks relative P/E is more than 1, its own P/E is greater than that of the market. If its relative P/E is less than 1, its own P/E is less than that of the market. Is Johnson & Johnsons P/E ratio greater or less than that of the market? ______________(5a) 6. A dividend is a payment by a company to a shareholder. It is usually in cash, and the cash is usually paid quarterly. The dividend yield (item 10) measures the expected cash dividend to be paid in the coming 12 months as a percent of the recent price of a stock. That is, the expected dividend is divided by the recent price of a stock to arrive at a figure that is shown as a %. Johnson & Johnsons current annual dividend is expected to be $1.96 a share (based on the recent increased quarterly rate of $0.49.) What is the stocks yield? ____________(6) 7. Timeliness (in item 1) is Value Lines prediction for the expected price performance of a stock over the coming 6 to 12 months relative to all other stocks in the Value Line universe of approximately 1,700 stocks. Timeliness ranks go from 1 (Highest) to 5 (Lowest). At any one time, there is a normal distribution of ranks, so that there are: 100 stocks ranked 1 (Highest) 300 stocks ranked 2 (Above Average) 900 (approx.) stocks ranked 3 (Average) 300 stocks ranked 4 (Below Average) 100 stocks ranked 5 (Lowest)

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Stocks with Timeliness ranks of 1 or 2 are likely to be above-average performers; those with ranks of 3 are likely to be average performers; those with ranks of 4 or 5 are likely to be below-average performers. Johnson & Johnsons Timeliness rank is ____________(7). That means that the stocks performance in the coming six to 12 months should be ____________(7a). 8. The Safety rank (in item 1) measures the financial strength of a company and the price volatility of its stock relative to other companies and stocks in the Value Line universe. As with Timeliness ranks, Safety ranks go from 1 (Highest) to 5 (Lowest). Safety ranks of 1 or 2 are most suitable for conservative investors. Johnson & Johnsons Safety rank is ____________(8). Is this stock a good one for someone who wants to minimize risk? ____________(8a) 9. The Technical rank (in item 1) uses a proprietary formula to predict short-term (3-6 months) future price returns of one stock relative to all others in the Value Line universe. This rank also goes from 1 (Highest) to 5 (Lowest). What is Johnson & Johnsons Technical rank? ____________(9) Does this mean that Johnson & Johnsons stock is most likely to be an above-average, average, or below-average performer in the coming three to six months? ________________(9a) 10. Beta (in item 1) measures a stocks price sensitivity to fluctuations of the market as a whole, as measured by the New York Stock Exchange Index. If a stocks Beta is 1.00, the stock should move in concert with the general market. If its Beta is 1.50, its stock price is likely to be 50% more volatile than the market. In this case, if the stock market goes up 10%, the stock should go up 15% (50% more than the market). If the market goes down 10%, this stock should go down 15%. If a stocks Beta is .80, the stock should be less volatile than the market. When the market goes up 10%, this stock should go up only 8%. Is Johnson & Johnsons stock likely to be more volatile, less volatile, or about the same as the market? _______________(10) 11. Value Lines 3- to 5-year Price Projections (item 29) are shown in the box below Beta. The projected 3- to 5-year share price range (indicated by the High and Low numbers) is also shown as the Target Price Range (item 11) in the upper right hand corner of the price chart, with a pair of broken lines. Value Line is forecasting that the price of Johnson & Johnsons stock 3 to 5 years from now will trade in a range between __________(11) and __________(11a). 12. Below the Price Projections box is another box titled Insider Decisions (item 28). This box shows decisions to buy stock, to exercise options, and to sell stock by insiders in the past nine months. It shows the number of transactions in each category each month. (Insiders are defined as officers and directors of a company, and we note that each transaction is counted separately. For instance, if an officer buys or sells stock in his company 3 times a month, the transactions are listed as 3.) Have insiders bought stock in the past nine months? __________(12)
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Have they exercised options? __________(12a) Have they sold stock? __________(12b) 13. The Institutional Decisions box (item 27) shows the number of times institutions with more than $100 million of assets under management bought or sold stock of this company during the past three quarters. It also shows the total number of shares of stock in this company held by these institutions at the end of each quarter. Did the number of shares of Johnson & Johnson owned by institutions rise or fall in the most recent quarter? ____________(13) Now lets look at the Stock Price Chart toward the top of each page. 14. The high and low calendar year prices of a stock are shown at the top of each chart (item 9). (A calendar year is January 1st through December 31st.) The years are identified at the bottom of the chart. What was the price range of Johnson & Johnsons stock in 2008? High __________(14) Low __________(14a) 15. In the chart, the vertical bars (item 3) represent the high/low monthly price ranges for a stock. Stock splits are also indicated (2-for-1, for example, in 2001). How many stock splits has Johnson & Johnson had since 1996? ____________(15) 16. The solid dark line in the chart is a Cash Flow Line (item 4), sometimes called the Value Line. One theory is that the price of a stock will tend to gravitate to this line. When the price of a stock gets above the line, the tendency over time will be for the price to go back down toward the line; when it gets below the line, there will be a tendency for the price to rise up to the line. (There are some stocks for which this theory has worked very well and others for which it hasnt. An investor should look at the historical price pattern of each stock and make a judgment about whether or not the theory applies to a particular stock.) Is Johnson & Johnsons stock price now above or below the cash flow line? ____________(16) 17. The dotted line toward the bottom of the chart shows the Relative Strength (item 12) of a stock. It compares the price of a stock at any one time with the price of the Value Line Arithmetic Index (a good broad representation of the stock market, based on all of the nearly 1,700 stocks in The Value Line Investment Survey). If the Relative Strength Line is rising, the stock price is going up more than the market, if the line is falling, the stock price is going up less. Has Johnson & Johnsons stock been going up more, about the same, or less than the market recently? ____________(17) 18. The Legends box (item 2) contains a number of useful items. First, it explains what the solid line and the dotted line are. Then, it shows the multiple of cash flow per share (shown in the statistical section below) which is used to plot the Cash Flow Line. The multiple is a number determined by an analyst to develop a line that most closely matches the actual historical prices of a stock. The box also includes the dates of stock splits, indicates if there are options traded on a stock, and explains that the
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shaded bar indicates a completed recession. Are there options traded on Johnson & Johnson stock? ____________(18) 19. The % Total Return box (item 13) shows the historical total return of a stock (appreciation or depreciation plus any cash dividends) over the past 1, 3, and 5 years and also the total return of the Value Line Arithmetic Index over the same periods. The figures are not averaged or compounded. What was the % total return of Johnson & Johnsons stock during the past year? ____________(19) What was the % total return of the Value Line Arithmetic Index during the past year? ____________(19a) Did Johnson & Johnsons stock do better or worse than the Value Line Index over the past year? ____________(19b) Did it do better or worse than the index over the past five years?________(19c) 20. The many columns of numbers in the center of the page are in what Value Line calls the Statistical Array (item 15). It is worth noting here that every time there is a stock split (2-for-1, 3-for-1, etc.) or a stock dividend (10%, 20%, etc.) all historical stock prices and per share data (sales per share, earnings per share, etc.) are adjusted for the stock splits and dividends. (In a 2-for-1 split, for example, all historical figures are divided by 2.) Split adjustments are a universal practice and are the primary reason why many of the numbers in one Value Line report may look quite different than those in an earlier report. There are two basic sections to the Statistical Array. The numbers in the top portion are all per share data. The numbers in the lower portion are total (or gross) figures. Also, the numbers to the left (prior to 2006) are historical, the numbers to the right (in bold) are projections. What were Johnson & Johnsons earnings per share in 2008? __________(20) What does Value Line expect Johnson & Johnsons average earnings per share will be in 2012-14? ____________(20a) 21. The Statistical Array contains a great many financial numbers and ratios. They are all generally commonly used items, and they are defined in the glossary of How To Invest In Common Stocks. There is much very useful information in the Statistical Array. Broadly speaking, the data allow investors to examine trends in a companys business. Have Johnson & Johnsons sales been rising over time? ____________(21) Have Johnson & Johnsons sales ever fallen from one year to the next during the past 10 years? ____________(21a) If so, when? ____________(21b) Did Johnson & Johnsons Net Profit Margin (net profits after all expenses, including taxes, as a % of sales) rise, fall, or stay level in 2008? ____________(21c) Has Johnson & Johnsons Return on Shareholders Equity been rising, falling, or staying within a range?____________(21d)
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22. Most of the total (gross) numbers in the Statistical Array are in millions of dollars ($mill). The number 47348, for example, means $47,348,000,000; 9311 means $9,311,000,000. What were Johnson & Johnsons sales in 2008? __________________(22) What was Johnson & Johnsons net profit in 2008? _________________(22a) 23. The Capital Structure Box (item 25) shows a variety of things, including the total amount of Debt Outstanding; Long-term Debt; the number of common shares outstanding; and Market Capitalization. Market Capitalization is the dollar value of common stock outstanding. It is calculated by multiplying the number of shares outstanding by the price of the stock. The two numbers multiplied to calculate the Market Capitalization of Johnson & Johnson are _______________(23) and _______________(23a). By the definitions used in The Value Line Investment Survey: A Large Capitalization Issue = $5 billion or more A Mid Capitalization Issue = $1 billion to $5 billion A Small Capitalization Issue = less than $1 billion Is the Market Capitalization of Johnson & Johnson, Large, Mid, or Small? ____________(23b) 24. Johnson & Johnsons current assets and current liabilities (items scheduled to be converted into cash or to be paid within one year) are shown in the section called the Current Position (item 24). It shows current assets, which include cash, receivables, and inventories, and current liabilities, which include accounts payable and debt due within one year. How much did Johnson & Johnson have invested in inventory on 3/29/09? ____________(24) What was the total of its Current Assets? ____________(24a) Current Liabilities? ____________(24b) 25. The Annual Rates box (item 23) shows annual compound rates of change of a companys sales, cash flow, earnings, dividends, and book value over the past 10 and 5 years and for 5 years into the future. In each case, the growth rates are calculated from a base which is the average of 3 years to an ending period which is also the average of 3 years. For example, a ten-year growth rate is calculated from a base of 1996-1998 to a base of 2006-2008. Was Johnson & Johnsons sales growth in the past 5 years, faster, slower, or the same as its sales growth over the past 10 years? ________________(25) Does the analyst think sales growth is likely to be faster or slower in the next 5 years? ________________(25a) Was Johnson & Johnsons earnings growth in the past 5 years, faster, slower, or the same as its earnings growth over the past 10 years? ________________(25b)

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Does the analyst think earnings growth is likely to be faster, slower, or about even in the next 5 years? ________________(25c) 26. The Business Summary (item 16) includes: a condensed summary of a companys operations, showing important products, markets, etc.; any shareholders owning more than 5% of the stock, including ESOPs (Employee Stock Ownership Plans); a companys address, telephone number, and Internet address; and other relevant information. How much of Johnson & Johnsons sales are international? ____________(26) 27. The Analysts Commentary (item 17), the lengthy text in the lower right portion of each report, is thought by many investors to be the most important item on the page. This is where a Security Analyst describes the outlook he/she sees for a company in the coming years, and, provides reasons for its investment suitability. After reading the commentary about Johnson & Johnson, do you think the analyst is suggesting that Johnson & Johnson stock should appeal to conservative investors? ____________(27) 28. Quarterly Sales, Earnings, and Dividend Data (items 21 and 22) are shown in the lower left portion of each report. An examination of the trends in quarterly sales and earnings can often provide insights into changing conditions. As an example, look at sales in the most recently reported quarter (March) when they totaled $15,026,000,000. Then look at sales in the March quarter a year earlier. What was the % decrease in sales from December 2007 to December 2008? ____________(28) Now compare sales in the latest March quarter with those in the March quarter a year before. What was the year-to-year % decrease in sales in that period?__________(28a) Was the year-to-year % decrease in sales in the December quarter more or less than the year-toyear % decrease in the March quarter? ____________(28b) Were earnings per share in the latest reported quarter (March) higher, lower, or the same as those in the similar period a year earlier (March)? _________________(28c)

29. Johnson & Johnson has had what appears to be a policy of regularly increasing its dividends. It has increased the dividend at approximately the same time in each of the past five years. What is the quarter (March, June, September, December) when it increased the dividend? ____________(29) 30. The heading over the fourth column of numbers in the Quarterly Sales and Earnings Per Share boxes shows when a companys fiscal year ends. When does Johnson & Johnsons fiscal year end? ____________(30) 31. The footnotes (item 20) at the bottom of each page explain a lot, including: the way earnings are reported - basic or diluted; unusual gains or losses; the availability of DRIPs (Dividend Reinvestment

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Plans, in which companies make it easy for shareholders to reinvest their dividends in more stock); dividend payment dates; and special explanations, as necessary. When is Johnson & Johnson expected to pay its next dividend? ________(31) Does Johnson & Johnson have a DRIP? __________(31a) 32. A variety of unique ratings (item 19) are shown in the box in the lower right of each report. Each of these items is defined briefly below and in more detail in How To Invest In Common Stocks. Financial Strength ratings, which measure the financial condition of a company, range from a high of A++ to a low of C. A Stocks Price Stability, Price Growth Persistence, and Earnings Predictability ratings go from a high of 100 to a low of 5. Price Stability measures he variability of the price of a stock over time. Price Growth Persistence is a measure of stock price growth over time. Earnings Predictability measures the expected reliability of earnings forecasts. In which category(ies) does Johnson & Johnson score at the very top? _________________________________________ _________________________________________ _________________________________________(32)

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Answers
1. 1a. 2. 3. 5. 5a. 6. 7. 7a. 8. 8a. 9. 9a. 10. 11. 11a. 12. 12a. 12b. 13. 14. 14a. 15. 16. 17. 18. 19. 19a. 19b. 19c. 20. 20a. New York Stock Exchange JNJ 12.3 12.2 0.84 Less 3.5% 2 Above Average 1 Yes 4 Below Average Less Volatile 110 90 Yes Yes Yes Fall 72.8 52.1 One Below Less Yes -19.6% -25.8% Better Better $4.57 $6.20 21. 21a. 21b. 21c. 21d. 22. 22a. 23. 23a. 23b. 24. 24a. 24b. 25. 25a. 25b. 25c. 26. 27. 28. 28a. 28b. 28c. 29. 30. 31. 31a. 32. Yes No Rise Staying within a range $63,747,000,000 (or $63.7 billion) $12,949,000,000 (or $12.9billion) 2,775,566,000 55.89 Large $5,359,000,000 $34,839,000,000 $21,325,000,000 Faster Slower The same Slower 49% Yes 4.9% 7.2% Less The same June December June Yes Companys Financial Strength, Stocks Price Stability, Earnings Predictability

To analyze your performance, see the facing page.

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Results/Performance
While the exercise of reading through the preceding text and filling in the blanks or answering the questions was not intended to be a test, but rather a guide to reading the Value Line page, there are some people who are always anxious to know how they performed. We suggest the following:

How Did You Do?

NUMBER WRONG 0-3 4-6 7-10 11 or more EVALUATION Expert Very Good Passed You should probably restudy the workbook

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